Market Movers Week 32

In partnership with

Dear Money Master,

Today, we look at yesterday's market sell-off, which wiped over $1 trillion from the mega-cap tech sector, and the end of the carry trade. What exactly is a carry trade? Our deep dive will help make sense of yesterday's news. This and more in today's newsletter.

👆 Please support us by clicking on our partners' ads. 🙏

📰 Your Daily Financial Digest - August 6th, 2024

🌍 Economics:

1. Mega-Cap Tech Stocks See $1 Trillion Wipeout 📉
   A sharp sell-off in mega-cap tech stocks wiped out nearly $1 trillion in market cap, affecting major players like Nvidia, Apple, and Amazon. This downturn has pushed the Nasdaq into correction territory, with broader market concerns over a potential recession. Read More

2. Carry Trades Unwind Amid Market Turmoil 💱
   A significant unwinding of carry trades is underway as investors retreat from risk assets due to a global market sell-off. Safe-haven currencies like the yen and Swiss franc have surged, highlighting investor concerns over recent economic data. Read More

3. Wall Street's Fear Gauge Hits Highest Level Since 2020 📈
   The VIX, a key measure of market volatility, spiked to over 65, its highest since March 2020. This surge reflects heightened market anxiety amid a sharp global equity sell-off. Read More

4. Cryptocurrencies Plummet Amid Recession Fears 💸
   Bitcoin and other cryptocurrencies experienced a sharp decline, with Bitcoin falling over 15% to just above $50,000. This drop is part of a broader sell-off in risk assets driven by recession worries. Read More

5. Japan's Stock Markets Rebound After Historic Plunge 📈
   The Nikkei 225 and Topix indexes rebounded sharply, gaining over 9% each, after suffering their worst losses since the 1987 crash. This recovery brought both indexes back into positive territory for the year. Read More

6. Treasury Yields Bounce Back After Market Rout 📉
   U.S. Treasury yields increased as investors reassessed the global market sell-off, with the 10-year Treasury note yield rising to 3.836%. This followed a significant drop in yields the previous day. Read More

💻 Technology:

1. Abnormal Security Raises $250M, Valuation Tops $5 Billion 🔒
   Cybersecurity firm Abnormal Security raised $250 million in a Series D funding round, bringing its valuation to $5.1 billion. The funds will help expand its AI-driven platform to combat advanced email threats. Read More

2. Core Scientific Expands AI Partnership with CoreWeave 🖥️
   Bitcoin miner Core Scientific announced an expanded $6.7 billion deal with CoreWeave, providing 112 megawatts of infrastructure for AI operations. This partnership marks a significant pivot towards AI infrastructure. Read More

💹Earnings:

1. Saudi Aramco's Q2 Profit Dips Amid Lower Production 🛢️
   Saudi Aramco reported a net profit of $29.1 billion for Q2, down 3% year-on-year, due to reduced crude production volumes. The company maintained its base dividend and announced an additional performance-linked dividend. Read More

2. Uber Tops Q2 Earnings Estimates, Shares Rise 🚗
   Uber reported better-than-expected Q2 earnings, with EPS of 47 cents against the expected 31 cents and revenue of $10.7 billion. The company's mobility unit saw a 23% increase in gross bookings, and Uber expects continued growth in Q3. Read More

Deep Dive: Understanding the Unwinding of Carry Trades 🌐

What are Carry Trades?
Carry trades are a financial strategy where investors borrow money in a currency with low interest rates, like the Japanese yen, and invest it in assets that offer higher returns. This strategy has been popular because it can generate significant profits when markets are stable.

What Happened Yesterday?
On Monday, a major unwinding of these carry trades occurred. Investors became nervous due to disappointing economic data and started pulling out of riskier investments. As they sold off these assets, they bought back the low-interest currencies they initially borrowed, like the yen and Swiss franc, causing these currencies to surge. This massive shift contributed to the broader market sell-off and increased volatility.

Why Does it Matter?
When carry trades unwind rapidly, it can cause significant disruptions in financial markets. The sudden buying back of borrowed currencies can lead to sharp currency fluctuations, affecting global markets. Investors need to be cautious and monitor these movements closely, as they can signal broader economic uncertainties and impact investment strategies.

We put your money to work

Betterment’s financial experts and automated investing technology are working behind the scenes to make your money hustle while you do whatever you want.

Learn more

To your financial empowerment, The Money Masters Team

P.S. Stay connected! Don't forget to follow us on social media! 📱🌐

Disclaimer: This information is for educational purposes only and should not be construed as financial advice. Always conduct your own research or consult with a financial advisor before making investment decisions.